ChargePoint’s Risk to Reward Is a Reason to Look for Safer Alternatives

In December 2020, InvestorPlace’s Todd Shriber discussed why investments in ChargePoint Holdings (NYSE:CHPT) stock, which at the time was about to merge with the special purpose acquisition company (SPAC) Switchback Energy, and two of its rivals — Nuvve Holding (NASDAQ:NVVE) and Blink Charging (NASDAQ:BLNK) — were an excellent way to bet on the electric vehicle (EV) market without as much risk posed by an EV bubble.

A close-up shot of a ChargePoint (CHPT) charging station.

Source: YuniqueB / Shutterstock.com

In hindsight, Tesla (NASDAQ:TSLA) has been the better call so far in 2021. Year-to-date through May 11, TSLA stock is down 12.5% compared to 44.7% for CHPT, 27.3% for BLNK, and 49.7% for NVVE.

In addition to ChargePoint, Blink, and Nuvve, there are also three more expected to merge with SPACs any day now — Volta Charging with Tortoise Acquisition II (NYSE:SNPR), EVgo with Climate Change Crisis Real Impact I (NYSE:CLII), and EVBox with TPG Pace Beneficial Finance (NYSE:TPGY) — which means investors are going to have a lot of options once all of the SPACs merge with their targets.

When I last wrote about ChargePoint on April 10, I re-emphasized that a buy in the mid-$20s ought to pay off for those willing to wait 12-24 months for their payday. However, you had to be patient. Now trading around $22.18 as of May 11, it goes without saying that the same caution applies. Perhaps, even more so, because the number of public EV companies is about to get a lot larger.

For risk-averse investors, I’d consider an exchange-traded fund (ETF) to buy that holds several of these companies to minimize the risk. For those only interested in buying stocks, here’s an alternative bet to buying ChargePoint or one of its rivals.

A Sounder Alternative to CHPT Stock

If you’re an aggressive investor, buying CHPT in the low $20s is a good call. But then, you understand you could lose 100% of your investment. For those who can’t afford to throw good money after bad, you ought to be considering profitable alternatives.

So, here’s my thought. The six electric charging station companies have a combined market capitalization of $15.08 billion.

Company Shares Outstanding Post-Merger

Share Price

(May 11)

Market

Cap

ChargePoint 303.03 million $22.18 $6.72 billion
Nuvve Holding 20.11 million $8.67 $174.35 million
Blink Charging 41.94 million $31.08 $1.30 billion
Volta Charging/Tortoise Acquisition II 203.1 million* $9.92 $2.01 billion
EVgo/Climate Change Crisis Real Impact I 263.1 million* $11.13 $2.93 billion
EVBox/TPG Pace Beneficial Finance 140.0 million* $13.93 $1.95 billion

Note: * Based on pro forma outstanding after mergers

What if you were to wait for an ETF that held a few of these stocks in its portfolio?

Well, the Invesco WilderHill Clean Energy ETF (NYSEARCA:PBW) already holds two of them — Blink’s got a weighting of 1.47% while ChargePoint is 1.76% — so that would give you coverage on the charging station front while also owning a bunch of other companies doing interesting things in clean energy.

Year-to-date through May 11, it’s down 27.3%, about half the loss of ChargePoint, and a little less than BLNK. However, over the past year, it’s up 131.8% and 32.51% over the past five years on an annualized basis.

To me, unless you’ve got a lot of capital or want to play a hunch, PBW is so much more sensible for buy-and-hold investors.

The other alternative is to buy a stock with a market cap of around $15 billion that generates positive free cash flow (FCF), a metric that generally steers you in the right direction.

Believe it or not, companies such as ChargePoint and Blink are considered to be consumer cyclical stocks operating in the specialty retail industry. Of the 27 specialty retail stocks with a market cap of $2 billion or more, Williams-Sonoma (NYSE:WSM), RH (NYSE:RH), and Ulta Beauty (NASDAQ:ULTA) are the three closest to $15 billion.

Of the three, WSM has the best FCF yield at 8.1% ($1.1 billion in FCF divided by market cap of $13.6 billion). I consider value territory anything 8% or higher.

The Bottom Line

If you were considering investing $5,000 in ChargePoint or one of the other companies, it might make sense to put $2,500 into ChargePoint and the other $2,500 into either PBW or WSM.

I assure you, you’ll be able to sleep better at night.

However, if you’re speculative by nature, you could do a lot worse than owning CHPT stock for the long haul, so have at ‘er.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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